NFC-Enabled Devices and Brand Adoption on the Rise

With wireless connectivity technologies like GPS and Bluetooth becoming standard for connected devices, Near Field Communication (NFC) is poised to be the next widely-available technology. While it might not be a household name yet, the number of NFC-enabled devices available is on the rise. Analyst firm Berg Insight reported in March 2012 that global sales of NFC-enabled handsets increased tenfold in 2011 to 30 million units, and they predicts that number will increase to 700 million units in 2016.

NFC Explained

NFC is a set of short-range wireless technologies, typically requiring a distance of 4 cm or less to initiate a connection. It allows smartphones and other NFC-enabled devices or electronic tags to establish radio communication with each other by either touching them together, or by bringing them within close proximity of each other. The technology is being used in mobile devices around the world, and over 40 NFC-enabled handsets were released in 2011 alone, including Google’s flagship Android device, the Samsung Galaxy Nexus. Unlike Bluetooth, another short-range communication technology, NFC doesn’t require users to pair their devices before communication can take part, and it requires less power than (but is also slower than) Bluetooth.

NFC for Mobile Payments

As CIO noted, the big potential for NFC technology is in mobile payments. Someone with an NFC-enabled device could pay for an item simply by waving his or her device near an NFC capable terminal. Startups are already taking advance of that capability. Mobile payments startup Boku has partnered with mobile network operators to allow people to pay for goods and services with their mobile device, and in February they announced Boku Accounts, a platform that lets carriers offer subscribers a full suite of in-store payment and loyalty services. The company is based in San Francisco, with offices in Europe and Asia, and it reaches nearly four billion consumers worldwide, across 66 different countries. The company’s investors include Andreessen Horowitz and Khosla Ventures, and they raised $35 million in funding in March 2012.

Bigger players are also taking advantage of NFC for mobile payments. Google Wallet allows consumers to store credit card information in a virtual wallet and then use an NFC-enabled device at terminals that also accept MasterCard PayPass transactions. Then there’s Isis, an NFC-enabled mobile wallet solution founded by AT&T Mobility, T-Mobile USA and Verizon Wireless, which is launching this summer in Austin and Salt Lake City and then expanding across the U.S.

But despite the increasing availability of NFC-enabled devices, Gartner’s Sandy Shen recently said that the biggest hurdle will be convincing users to pay with their mobile phones, and she believes that mass-market adoption of NFC payments is at least four years away. “The biggest hurdle is the need to change user behavior by convincing consumers to pay with mobile phones instead of cash and cards,” she noted. The difficulty getting consumers on board is already evident, as NFC payments pioneer Bling Nation suspended its service in June 2011 as it looked to revamp its business model.

Other Applications

NFC is also providing a replacement for QR codes, which have struggled to gain mass adoption, but are still used by marketers and companies around the world. There are increasing use cases for NFC in everyday life – they can act as a real-world link to online destinations, so someone walking by an NFC-enabled “smartposter” is brought to customized content. Or they can allow devices to interact with each other – people could touch an NFC remote control to a TV to set preference, or pair a device with a headset by touching them together.There are also implications for social networking due to NFC technology – it can be used to share contacts, videos, photos, or files.

Miami-based startup Flomio is trying to help developers add NFC into their web applications using their API, tags, readers and software. The company was part of the Incubate Miami startup accelerator in 2011, and co-founder Richard Grundy previously worked as an engineer at Motorola. He got the idea for the company while working with event organizers and marketing firms to deliver experiences that blurred the line between the physical and digital world.

The company helps developers use NFC in their web apps. Flomio sells NFC tags and readers through their online store, though any NFC tags or readers can be used. Users can then add a project on Flomio using the Mac and Android apps (they are working to add support for iOS and Windows). Once a tag is scanned with an Android or USB reader, the info is stored in the Flomio cloud, and the user is brought to the web app. “After this they log into the Flomio platform, give us the URL of their web app, and we immediately begin transmitting information as NFC activity occurs. It’s super easy,” said co-founder John Bullard in an interview. He said the process for consumers is also simple – they touch their NFC-enabled phone or tag to a Flomio-powered reader, and then they’re brought to that specific experience.

The company does make money from the hardware sales, but their main business model is a per-use or unlimited monthly plan. They opened up their private beta for applications a month ago, and Bullard said they’ve had strong interest from a number of large brands, though he couldn’t disclose which companies they’re working with.

Brand Usage

As the interest in Flomio’s solution shows, brands are increasingly integrating looking to integarte NFC into their offerings. There are many examples of companies that are already leveraging NFC – consumers can now use the tech to transfer photos from their NFC-enabled device to one of FujiFilm’s SmartPix kiosks and order prints; Dubai-based Emirates NBD is now offering a MoneyMobile mobile payments service; and in-car entertainment specialist Harman recently introduced a personalized dashboard powered by NFC, which allows consumers to automatically set seating and entertainment preferences. There are also bigger opportunities for traditionally offline businesses to take advantage of NFC technology – several countries around the world, including Germany and China, have used NFC ticketing systems for public transportation. And in India, box offices are using NFC-based transactions for ticketing.

Moving Forward

Security concerns are still ever-present with NFC technology, even though the communication range is small (a few centimeters). One of the biggest concerns is what happens if someone loses their device. Along with security, a big barrier to NFC for technologists will be its widespread availability. Although it’s growing rapidly, NFC isn’t yet available on Apple products, though it is expected to be included in the iPhone 5. Companies big and small are already attempting to integrate NFC-enabled tech into their offerings, and with the number of NFC-equipped devices likely to explode over the next few years, the potential for the technology can only increase. But as with QR codes, the utility will be dictated by consumer adoption, and if Bling Nation’s hiatus is any indication, there’s still a ways to go in terms of getting the average smartphone user on board.

Flomio’s Bullard is confident that NFC is about to cross the chasm into mainstream consumer adoption. “Isis, the consortium between the biggest mobile carriers and payment processors, is moving forward with NFC payment tests this summer. In parallel Google is aggressively marketing their NFC-enabled Google Wallet offering. And all signs, from patent filings to strategic hires, point to Apple including NFC in the next generation iPhone 5,” he said. “We’re not alone in thinking these factors combined will push NFC over the tipping point and into mass adoption.”

Erin Bury is the Managing Director at Eighty-Eight, a creative communications agency based in Toronto. She was formerly the Managing Editor at BetaKit, and currently writes a monthly column for the Financial Post. Follow her on Twitter at @erinbury.